Gold steps on the gas

February is often a quiet month as far as demand for American Eagle gold bullion coins goes.

Not this year.

The initial January sales rush for a new date has been followed by an ongoing rush to purchase coins in February.

Roughly one-third of the way through the month, the U.S. Mint has sold 30,500 one-ounce gold Eagles.

If you multiple this by three, you will arrive at 91,500, which would be even better than the 89,000 coins sold in January.

Will we get there?

It depends on your view of the stability of the financial system.

Present high demand is not about an inflation hedge play.

For example, trading at $1,240 a troy ounce, gold can purchase far more gasoline than it could in 2007 when I paid $4.25 a gallon.

The highest price gold achieved in that month was $685, according to the Kitco website.

That means one ounce could purchase about 161 gallons of gas.

As I drove in this morning, gasoline was $1.539 here in Iola, Wis.

That works out to a whopping 806 gallons of gasoline.

Clearly owners of gold are cleaning up when compared to their cost of gasoline.

In 2007 we were worried about the high cost of living. Now we seem to be worried about whether the system will simply allow us to survive. That is what is driving gold’s price at the moment.

For those who are emotionally attached to silver, and I know a lot of coin collectors are, myself included, the comparative figures are not as strong.

In July 2007 an ounce of silver was $13.02 while gasoline was $4.25.

Now silver is $15.73 with gasoline at $1.539.

That means an ounce of silver bought 3 gallons of gas in 2007 and 10 gallons now.

It is a nice gain. You can buy 3.3 times as much gasoline with an ounce of silver as in 2007.

But for gold, you can buy 5 times as many gallons. This means gold has outperformed silver.

The lesson?

Be as attached to silver as you want to be, but be sure to own a little gold as well.

Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."

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